Avoid Maxing Out Your Credit Card with These 7 Tips

It’s much easier to overspend with a credit card than cash. You go to the mall to buy just one item with your card, but then you end up spending more than what you’ve planned. Alas, your budget gets ruined, and now you’re dreading your next billing statement.

Can you relate? You might not know that you’re already going over your credit card limit.

When you exceed your credit limit, the bank will charge you an over-the-limit fee ranging from PHP 500 to PHP 1,500. Or it may decline your succeeding purchases until you’ve paid down your credit card balance.

On the surface, asking the bank for a credit limit increase may seem to prevent a maxed out credit card—but it will just push you to spend more because of the higher purchasing power. Avoid such a credit card mistake with these seven tips.

1. Know Your Credit Card Limit

Do you know your credit limit? If you don’t, it’s a lot harder to put a limit on your credit card spending. You’ll just keep on swiping your card until reality confronts you—your balance has gone up you can’t afford to pay it off. How can you possibly prevent maxing out your credit card if you don’t know your credit limit?

2. Keep Your Balance up to 30% of Your Actual Credit Card Limit

Having a big credit limit means you can purchase more, but that doesn’t equate to having a huge sum of money in the bank. It neither means you should max out your credit card.

To avoid going over your credit card limit, determine your own personal credit limit. Base it on your income and expenses—not the credit limit set by your credit card provider.

Ideally, keep your credit card balance low at 30%. For example, if your credit card limit is PHP 50,000, limit your credit card spending at PHP 15,000. This threshold applies to what you owe the bank not only on each of your credit cards but also the total balance across all your cards.

3. Track Your Credit Card Spending

Be on top of your credit card usage. Keeping track of your credit card spending helps you foresee any credit card that will soon max out and adjust your spending accordingly.

If you receive your credit card statements late, you can check your balance using your bank’s online banking service instead. Enroll your credit card account to your online banking account so that you can monitor your statements anytime and anywhere.

4. Be More Cautious If You Have Multiple Credit Cards

Multiple credit cards create more opportunities for spending, especially unplanned ones. They’re also harder to manage than a single card. If you have two or more plastic cards, be more careful with your spending habits to avoid getting one of your cards maxed out. Be more diligent also in tracking all the purchases made with your credit cards.

5. Check Your Available Credit Before Making a Purchase

Knowing your available credit before you pay with your credit card is as important as knowing your credit limit. Doing so lets you know whether you should go ahead with the purchase or postpone it until you’ve paid off your balance.

If you aren’t sure how much your available credit is, call the bank before you purchase something with your credit card. You can find your credit card provider’s customer service hotline at the back of your plastic card. Or using your smartphone, check your online account via your bank’s mobile app.

6. Stop Using Your Card When You’re Coming Close to Your Credit Limit

As soon as you’ve found out that your balance is getting close to your credit card limit, stop using your card until you’ve paid off the balance. Leave it at home, if you must.

7. Remember That Your Credit Card isn’t Free Money

Having the right mindset curbs spending and prevents a maxed out credit card. Remember that whatever you purchase, you need to pay it back on time.

Before you make a purchase with your card, always ask yourself: “Can I afford to pay it back in cash right now?” If not, save yourself the trouble of dealing with a maxed out credit card in the future. Treat each credit card purchase as though you’re actually using cash. It’s easier to control your spending that way.